There appears to be a lot of different issues involved with this whole mess.
To me it looks like mortgage companies buy and sell the debt for the interest. My mother unexpectedly paid off the last of her mortgage in one lump sum and triggered a foreclosure attempt. Somebody bought the debt expecting interest to be paid over time. She paid it all at once and someone was left holding an empty bag. The mortgage servicer dropped the foreclosure attempt but her deed is still getting straightened out.
I’m surprised they tried to pull that on your mother. Modern mortgage agreements specifically authorize an early payoff by the mortgagee. You would think that all your mother would have to do is pull out her mortgage and point to Paragraph X subsection Y, and that would be the end of it.